There were times when the Berlin smartphone bank N26 terrified the established banks. The bank grew so quickly. That’s long gone. N26 is the most expensive German financial start-up. But the company has so many problems that it has lost its lead in digital banking.
Recent examples are account bans and lack of communication. Customers are outraged because their N26 account was abruptly terminated in the past few days.
N26 itself admits that the blocking of the accounts is related to money laundering controls and checks for possible fraudulent account activity.
It is obvious that the bank searches its customer base very extensively for potentially suspicious accounts and prefers to give too many notices. That would be a problem with a “normal” bank. With a fintech that usually attaches great importance to technically perfect solutions, it is a disaster.
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And yet it’s just the tip of a whole iceberg of problems. N26 has made so many mistakes that fundamental questions have long been asked about the future of this so-called neobank – regardless of how many more than the last reported seven million customers N26 now has.
Because N26 does not control parts of the essential banking business. The company has been struggling to improve its money laundering controls for some time.
Growth becomes more difficult
The German financial regulator Bafin has already capped N26’s growth in new customers, and the Italian regulator has even put a stop to new customers.
The regulatory issues are not the only ones. The expansion also failed in parts. N26 is currently mainly focused on Europe – involuntarily. The company, which once announced 100 million customers worldwide as a target, withdrew from the USA in early 2022.
N26 also reveals surprising weaknesses in terms of the product range. Unlike other neobanks, N26 still does not offer trading in securities and cryptocurrencies. This is fatal. After all, many younger people have discovered the stock market for themselves, especially in the last boom years on the stock exchange. Even the savings banks are further along.
N26’s problems have given traditional banks and savings banks, but also other digital banks, time to improve their own banking apps. Even more: N26 is showing the established financial institutions what they should not do.
More: N26 justifies account terminations: “Important ingredient” against financial crime